- Kenya’s overall inflation declined further to 5.7 per cent in March 2024 from 6.3 per cent in February, driven by lower food and fuel inflation.
- The apex bank noted inflationary pressure had further eased with core inflation — non-food, non-fuel inflation declining.
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The Central Bank of Kenya (CBK) has left its benchmark lending rate unchanged at 13 per cent with inflation having retreated last month.
On Wednesday the apex bank noted inflationary pressure had further eased with core inflation — non-food, non-fuel inflation declining.
The Monetary Policy Committee (MPC) noted that inflation is expected to remain within the target range, supported by lower food prices with the expected improved supply.
"The current monetary policy stance will ensure that overall inflation continues to decline towards the five per cent mid-point of the target range and thus decided to retain the Central Bank Rate (CBR) at 13 per cent."
The monetary policy top organ says will closely monitor the impact of the policy measures as well as developments in the global and domestic economy and stands ready to take further action as necessary in line with its mandate.
Kenya’s overall inflation declined further to 5.7 per cent in March 2024 from 6.3 per cent in February, driven by lower food and fuel inflation.
Food inflation declined to 5.8 per cent in March from 6.9 per cent in February, reflecting lower prices of some food items, particularly maize and wheat products, carrots, kales/sukuma wiki, spinach, and cabbages, following improved supply attributed to ongoing harvests and favourable weather conditions.
Fuel inflation declined to 12.3 percent in March from 13.4 percent in February, largely reflecting the impact of the shilling’s appreciation which resulted in a decrease in electricity prices and a downward adjustment in pump prices.
Non-food non-fuel (NFNF) inflation remained stable at 3.6 percent in February and March.
Overall inflation is expected to moderate further in the near term, supported by easing food and energy prices, pass-through effects of the recent exchange rate appreciation, and the impact of monetary policy actions that continue to filter through the economy.
According to CBK, leading indicators point to the continued strong performance of the Kenyan economy in the first quarter of 2024, reflecting robust activity in the agriculture and service sectors, particularly accommodation and food services, and information and communication.
The CEOs Survey and Market Perceptions Survey which were conducted ahead of the MPC meeting revealed increased optimism about business activity and economic growth prospects for the next 12 months.
The stronger optimism was attributed to enhanced agricultural performance on account of favorable weather and government interventions in the sector, easing inflation, strengthening of the Kenya Shilling and a resilient private sector.
Nonetheless, respondents remained concerned about taxation, high-interest rates, and geopolitical risks.
The current account deficit is estimated at 4.3 per cent of GDP in the 12 months to February 2024, down from 4.7 per cent of GDP in a similar period of 2023, and is projected at 4.0 per cent of GDP in 2024.
Goods exports declined by 1.7 per cent in the 12 months to February 2024 compared to an increase of 9.6 per cent in a similar period in 2023.
The decline in exports in 2023 was across several categories, except food, petroleum products and manufactured goods exports which increased by three per cent, 20.3 per cent, and 1.4 per cent, respectively.
The increase in manufactured export receipts reflects strong regional demand.
Goods imports declined by 8.5 per cent in the 12 months to February 2024 compared to a growth of 3.5 per cent in a similar period of 2023, reflecting lower imports across all categories, except food and crude materials.
The banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios.
The ratio of gross non-performing loans (NPLs) to gross loans stood at 15.5 percent in February 2024 compared to 14.8 per cent in December 2023.
Increases in NPLs were noted in the real estate, trade, personal and household, energy and water and building and construction sectors. Banks have continued to make adequate provisions for the NPLs.
Growth in commercial bank lending to the private sector stood at 10.3 percent in February 2024 compared to 13.8 percent in January 2024.
Credit growth to selected key sectors was as follows: manufacturing (13.6 per cent), transport and communication (7.5 per cent), trade(10.7 per cent), and consumer durables (7.4 per cent).
The number of loan applications and approvals remained resilient, reflecting sustained demand, particularly for working capital requirements.